Washington’s Brassy Influence Peddlers (Mar, 1960)

Retired generals and admirals cozy up to their old buddies to swing billions of dollars in defense contracts!

By FRANK DEGNAN

LAST JULY, three of the largest defense contractors in the nation readied plans to entertain Air Force Lt. General Bernard S. Schriever, head of the Air Research and Development Command. Party invitations described the affair as cocktails and dinner with an off-the-record chat by General Schriever about his plans and problems.
The party was suddenly cancelled when a newspaper carried a report on it. Why? Because at that very moment the House Armed Services Committee was investigating influence peddling by retired high-ranking officers suspected of using undue influence and pressure to get defense contracts amounting to millions of dollars for their new employers.

Hosts for General Schriever’s party—scheduled for the Pan-American Room of the Statler-Hilton Hotel in Washington—were Frank Pace, Jr., Secretary of the Army during 1950-53 and now chairman of the board of General Dynamics Corp.; Dan A. Kimball, Secretary of the Navy during 1951-53 and now president of Aerojet-General Corp., and William B. Bergen, president of the Martin Co.

Washington is famed for its parties for high Government officials, foreign dignitaries, industry moguls and hundreds of lesser lights. None of them outdo the serenading the high Pentagon brass gets from friendly emissaries of defense contractors with the emissary usually being a retired general or admiral. When the evening wears on and conviviality runs high, conversation turns to the lush multi-million dollar defense contracts that big companies fight for.

Up and down Connecticut Avenue and Sixteenth Street; in swanky homes and former embassy mansions; in fine hotels like the Mayflower, the Congressional and the Shoreham; these nightly gatherings entertain Government officials and generals and admirals responsible for awarding defense contracts.

Before the generals and admirals switch to civilian life on retirement, they are courted assiduously by the defense contractors who dangle the lure of high salaries to get their influence and friendships inside the Pentagon on contract letting.

How serious is this influence peddling? At a recent Presidential press conference, these generals and admirals and other influence peddlers working for large defense contractors were referred to by President Eisenhower as a “munitions lobby.” And they certainly are! In the scramble to get and keep defense contracts it’s invaluable for a company to have a few retired admirals or generals on tap. And companies spare no efforts to see they do have a few sitting around the board rooms, ready for a trip to Washington for a chat with a key Defense Department official. Here’s the importance North American Aviation, Inc., of Columbus, Ohio, places on a military man: The following is an advertisement placed by North American in the Wall Street Journal of May 7, 1959:

MILITARY ADVISOR To advise—counsel—report to high level management on military matters as they apply to long range development planning. Must be personable with high degree of speaking and writing ability. Military background with rank of Air Force Colonel or Navy Captain or higher. Experience on Joint Staff of the Joint Chiefs of Staff desirable. (Author’s italics) Mail Resume to: Mr. J. A. Swanson North American Aviation, Inc.

4300 East Fifth Ave.

Columbus 16, Ohio Asked Representative F. Edward Hebert (D., La.), chairman of the House Special Investigations Subcommittee, about this advertisement: “In effect you were trying to buy not only the ability of the applicant but also the knowledge he acquired in the Joint Chiefs of Staff organization where all the papers are secret?”

How many retired military officers are now working for defense contractors? Unofficial estimates place the number at 2,500. Senator Paul “Douglas (D., Ill.) revealed that there were 769 officers holding the rank of Colonel in the Air Force or Army, or Captain in the Navy, and above, in the employ of companies that got nearly three-fourths of all defense business, with contracts running into billions.

These retired officers using their names and influence to wangle fat contracts for the companies now employing them boost the nation’s defense bill, since most of the contracts are negotiated rather than let by competitive bidding.

Listen to Representative Alfred E. Santangelo (D., N.Y.): “If we are to reduce the wasteful defense expenditures, we must eliminate the Pentagon influence by former retired general officers upon those who let contracts.”

A former assistant Air Force Secretary admitted that retired military officers did try to influence decisions at the Pentagon—at least while he was there several years ago. Edwin V. Huggins, now executive vice president of Westinghouse Electric Corp., testified to this before the House Special Investigations Subcommittee. Mr. Huggins said that while he was a top Air Force official from 1952 to 1953, some retired officers were “too evident” by their presence in the Pentagon. It was clear they were “around too much,” he added.

Admiral Hyman G. Rickover, father of the atomic submarine, was asked by a Congressional committee: “Do you have visits from former associates?” He replied, “I used to, but the word got around that I’m obtuse. But they go higher up and I sometimes get pressures from that.”

Commenting on influence peddling to get lush Government contracts, Senator Douglas said that 85% of all defense contracts are negotiated by the Pentagon, rather than awarded to the lowest bidder. “When companies with defense contracts hire officers of high rank, some of whom negotiate with their fellow officers, or who may sit in the back room while such negotiations are going on, or who have information from their former comrades which is useful to their companies, the potential and actual abuses of the negotiated contract system are magnified,” added Senator Douglas.

Negotiated contracts have resulted in the Government getting gypped many times in the past. On one occasion the Government was overcharged more than $12 million on contracts because of careless negotiation. Even Assistant Secretary of the Navy, Cecil P. Milne admitted to a House Committee that the Navy did a “bad job” on the contracts.

The Government has had its pocket picked before. Largely forgotten, but still good examples of what indifference to influence peddling can cost, are past scandals. Remember the five-percenters! In July, 1949, Major General Herman Feldman, 59, who joined the army as a private and served for 42 years, finally reaching the post of Quartermaster General, was suspended by Army Secretary Gray. The charge—furnishing a contractor’s representative procurement information under irregular circumstances.

At the same time Major General Alden H. Waitt, 56, head of the Chemical Corps was also suspended because he “improperly furnished personnel data” to a civilian.

The two generals were friends of retired Army Colonel James VK Hunt, a five-percenter, whose friends helped him get defense contracts.

Getting weapons contracts from the Government is still too often conducted on a close personal basis. Recently, a top official of the Martin Company, missile manufacturers, admitted to House investigators that his firm had flown high-ranking military officers to an exclusive country club in the Bahamas for gay weekend parties. This official was George M. Bunker, chairman of the board.

Martin deducts the cost of the junkets from its tax payments. Martin has about $800 million worth of defense work under contract. Bunker said the purpose of the weekend pleasure trips was to bring about a “closer relationship” between Martin officials and those in the military, the Government and industry. He said the Martin Company picks up the tab for the weekend entertainment at an exclusive country club called Eleutheria on one of the Atlantic Ocean isles off the Florida coast.

The cost of all this entertainment to benefit the companies’ and tickle the vanity of the generals and admirals comes out of the taxpayer’s pocket. And on top of that he can get stuck again by lax negotiating of contract terms when influence creeps in.

That’s not all! The retirement pay of ex-officers also comes from the lean wallets of the taxpayer. Retired generals on defense contractors’ payroll are also on Uncle Sam’s payroll. “Double-dipping,” Representative Hebert calls this. He says, “Isn’t that In effect getting two paychecks from the Government? Isn’t the officer—as we call it down in Louisiana—double -dipping?”

Retired officers are still members of the armed forces and subject to court martial. Existing laws bar officers from drawing retirement pay while selling to their former services. The Navy prohibits a retired officer from drawing retirement pay as long as he sells defense materials to the Navy. The Army and Air Force hold up retirement pay for two years after an officer retires if he is selling material to them.

But, what is selling? Anybody that knows anything about salesmanship knows that the days of the old time drummer are gone. Today’s salesmen use the soft sell techniques and hidden persuasion. They pretend to be anything but a salesman. To avoid the law, it’s easy enough to have the retired general close the sale and send an order-taker around to pick up the contract Apparently this is what happens.

Thomas S. Gates, as Deputy Secretary of Defense, said it was common for a retired officer to come to him to “talk business.” He said none had tried to exert pressure on him. But Senator Douglas accuses Defense Department officials of trying to “cover up” abuses by claiming that limitations on the employment of retired officers would hurt the defense program.

Are the services taking any action to prevent influence peddling? Mr.

Gates said that the Navy was investigating 300 cases that indicated “some possibility of conflict of interest” among retired Navy officers now working for defense industries. He said the Navy sent out more than 4,200 questionnaires to former officers. Replies were received from about 3,400. From these come the 300 cases under investigation.

That’s about as far as it gets. The only recent case of a retired military officer being penalized for representing a defense contractor is a retired Navy lieutenant commander forced to forfeit his retirement pay during an eight-month period when he sold beer to officers’ clubs and ships’ stores.

Representative Santangelo charges that an “unsavory aura” has been cast over all defense procurement by the “extensive hiring of retired military personnel. This practice of hiring retired officials smells to the high heavens,” he declares.

He advocates a ban on defense industry employment of senior officers for five years after their retirement. And Representative Charles E. Bennett (D., Fla.) has introduced a bill to make it a crime for any business that has dealt with the Government through a particular officer to employ him or offer him employment for two years before as well as two years after his retirement. Either of these two bills, if passed, would go a long way toward cutting down on the influence-peddling.

The pressures generated within the Pentagon and in Washington by the billions of dollars expended annually for defense are enormous. Can we be sure we are getting the best weapons for this money if contracts are awarded on the basis of influence?

Hardly! What happens when a company is in danger of losing a lucrative government contract or isn’t getting its supposed share of a new one? What happens is a mobilization of forces and pressures by the company on a scale of vast proportions. If it’s a missile contract that’s being withdrawn, for example, the company fights back by advertising the missile’s great importance in magazines and newspapers; and their inside men swing into action with retired officers leading the charge.

Gates, the new Secretary of Defense, said he didn’t like magazine advertisements by companies with defense contracts pointing up their contributions to defense. He might have added that the taxpayer doesn’t like it either, since all the crowing is paid for by him. The cost of the advertisements is tax-deductible as a business expense.

Representative Hebert, chairman of the House Special Investigations Subcommittee, says: “The American people are alarmed and aroused at what they see and what they hear today about the conduct of our weapons procurement and about the alleged conduct of some military men who depart from the ranks of defense for lush places on the payrolls of defense contractors.”

That’s no overstatement.

In an atmosphere of big spending and the urgency to keep up in the missile race, the cost of war readiness goes up faster than a high speed rocket. The tab runs into billions. Corporations are adept infighters at competing for this business. Their methods are costing us all more than it should to protect ourselves. And when influence decides who gets a contract there is always the possibility that we are getting something less than the best. We can’t afford any undercover alliances between big defense contractors and officers of the armed services. • • •